Ibovespa futures fell, signaling the gauge may extend a weekly decline, after Standard & Poor’s revised Brazil’s credit outlook to negative, citing sluggish economic growth and an expansionary fiscal policy.
State-controlled oil company Petroleo Brasileiro SA and government-run power utility Centrais Eletricas Brasileiras SA may be active as S&P also changed their credit outlook to negative. Homebuilder Gafisa SA might move after agreeing to sell a stake in Alphaville Urbanismo SA to AE Investimentos, which is owned by investment funds managed by Patria and Blackstone.
Ibovespa futures contracts expiring in June dropped 1.4 percent to 52,100 at 9:02 a.m. in Sao Paulo. The real weakened 0.8 percent to 2.1468 per dollar, heading for its lowest level in more than four years.
S&P said in a statement yesterday it lowered the outlook on Brazil’s BBB rating, which is two levels above junk and in line with Mexico and Russia, from stable as forecasts for a third year of “modest” economic growth and “weaker” fiscal policy could lead to an increase in the government’s debt levels.
“This review confirms the very negative feeling investors are having this year about the government’s indebtedness and Brazil’s scenario of low growth and stubborn inflation,” Luis Gustavo Pereira, an analyst at brokerage firm Futura Corretora, said in an interview from Sao Paulo.
The Ibovespa has slumped 16 percent from this year’s peak on Jan. 3 amid concern accelerating inflation may curb Brazil’s economic recovery and the government’s interventionist policies will hurt profits in industries including utilities and energy. The MSCI BRIC Index of shares in Brazil, Russia, India and China has dropped 12 percent over the same period.
Brazil’s benchmark equity gauge trades at 11.2 times analysts’ earnings estimates for the next four quarters, compared with a 10.5 multiple for the MSCI Emerging Markets Index of 21 developing nations’ equities, data compiled by Bloomberg show.
Trading volume for stocks in Sao Paulo was 7.27 billion reais ($3.4 billion) yesterday, compared with a daily average of 7.71 billion reais this year, according to data compiled by the exchange.